Financial Aid and FAFSA

Brought to you by the American School Counselor Association

The first step in the financial aid process is to file the FAFSA (Free Application for Federal Student Aid). Hopefully, you've read up on the FAFSA and its importance in the financial aid process.

Even if you don't think you will qualify for grants, you must file a FAFSA to be eligible for federal loans as well as work-study jobs. Even though the FAFSA pertains directly to federal aid, most states use the FAFSA to determine state-based financial aid.

The FAFSA deadline is June 30th, but you should file as soon as possible. Most colleges have earlier deadlines, so you may have already filed an estimated FAFSA.

O.K., I've filed my FAFSA, or plan to do so soon. What's next?

Once you file your FAFSA, expect to receive a SAR (Student Aid Report) in about four weeks. The SAR is a computer-generated printout of the information you reported in the FAFSA. If nothing needs to be corrected, file this in your financial aid file (if you don't have a file, start one).

If corrections are necessary, make them and then make a copy before sending the form back. Each of the colleges that you designated on the FAFSA will receive a copy of your SAR. State, federal, and school-based financial aid will be determined based on your SAR.

How do colleges calculate financial need?

To receive federal aid, you must be able to demonstrate financial need. Unfortunately, what you think of as need and what Uncle Sam considers need usually isn't the same.

The student and parents are expected to pay a portion of the educational expenses based on the family's financial circumstances. As shown below, the difference between the Budget and the amount of the Expected Family Contribution (EFC) determines Financial Need in the eyes of FAFSA.

Budget: includes tuition; room and board; books and supplies; transportation, etc. These expenses are all determined by the school.

Expected Family Contribution: an index of a family's ability to contribute toward the cost of education.

Basically, there are four types of financial aid:

1. Scholarships
2. Grants
3. Loans
4. Work study opportunities

How is the EFC calculated?

Expected Family Contribution is calculated using guidelines set by Congress; however, it is basically determined by combining the Expected Parent Contribution and the Expected Student Contribution. What makes up the expected contributions?

For parents:

Total taxed and untaxed income

Assets such as savings and investments, but NOT home equity

A factor for the number of dependents enrolled in post secondary education For students:

Earnings, excluding the first $2,200 (50 percent of everything over $2,200)

35 percent of net savings

When will I find out if I am eligible?

Within a few weeks after receiving your SAR, you should hear from the school. You'll receive some form of a financial aid award letter detailing your eligibility.

Remember, applying for federal aid is free. Your kids can obtain a FAFSA at their high school guidance offices, libraries, or by calling the Federal Student Aid Information Center toll-free at 1-800-433-3243 (TDD 1-800-730-8913).

You may also want to check out the FAFSA, FinAid, and the government's education websites.

In future articles we'll detail the abundance of private sources of financial aid -- especially on the Web. Until then, good luck.